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World's pension funds ignoring climate risk: survey

Wind generators are seen next to power lines near Bergheim, western Germany on December 8, 2012. The world's biggest investors have their "heads in the sand" over climate risk, according to a survey released Tuesday which warned of risks to pension funds.

The world's biggest investors have their "heads in the sand" over climate risk, according to a survey released Tuesday which warned of risks to pension funds.

The Asset Owners Disclosure Project (AODP) looked at the world's 1,000 largest retirement funds, insurance companies and sovereign wealth pools on their management of the risks associated with rising global temperatures.

The survey showed that a "large proportion of funds have their heads in the sand over climate risk", said the project's executive director Julian Poulter.

"Climate change will be recognised soon as the real threat that it represents not only to nature as we know it on earth, but also to humanity. Funds have yet to recognise that a tipping point has been reached."

The AODP, an independent global organisation which aims to protect superannuation and pension fund members' retirement savings from climate change risks, surveyed companies together managing more than US$60 trillion.

It examined how firms from 63 countries around the world -- more than 800 of them pension funds but also 80 insurance companies and 50 sovereign wealth funds -- responded in areas such as risk management and low-carbon investment.

Only 17 firms responded directly to the survey but the project was able to rank 314 asset owners in total via their own two-year analysis, despite 91 of these releasing no public information on their climate change capability.

The survey found many funds did not have a climate change policy and many that did hadn't changed investment decisions as a result.

Poulter said he was not convinced that a single firm had accurately assessed or managed its climate risk over its entire portfolio of investments.

"The vast swathe of the industry is frankly operating on a business as usual basis," he said.

"You can't trade out profitably from these big systemic risks and there is none more big or systemic than climate change."

The survey found that Australia was the standout performer in the index, with disclosure disciplines more embedded than elsewhere.

South Africa's Government Employees Pension Fund (GEPF) also received a high rating because it had calculated its exposure to fossil fuel reserves via the balance sheets of its investee companies.

The index indicated that US firms tended to be much more active with raising shareholder resolutions, including those related to environmental, social and governance issues while European funds tended to rate well.